'Chewing gum' tax cut could be shelved, hints Cullen

Michael Cullen

The Government's widely mocked plan to increase tax thresholds might not be implemented at all, Finance Minister Michael Cullen hinted today.

The move was derided as the "chewing gum" budget as it would have given many people just 67 cents a week more take home pay.

Dr Cullen told MPs that the axed carbon tax had been tagged to fund the drop in revenue caused by raising the thresholds at which people moved into higher tax brackets.

Now the carbon tax had been dropped, no decision had been taken on whether the Government would still proceed with lifting the thresholds, he said.

Dr Cullen also blamed the Maori Party for putting the final nail in the coffin of the controversial pollution tax, saying they had indicated they would not support it and he did not trust them enough to rely on their vote anyway.

In his last budget, Dr Cullen was stung by criticism that his plan to inflation index tax thresholds from 2008 was too little, too late after speculation he would unveil something more substantial.

Lifting the thresholds would put between $35 and $534 in taxpayers' pockets a year costing an estimated $360m in 2008/09.

Appearing before the finance select committee today, Dr Cullen was non-committal on whether he intended to implement the lift in tax thresholds.

"There is no final decision on that," Dr Cullen said.

"I have noted that people have said they don't think it's really worth having. So if people say that, they may of course find their wish has been granted, but no final decision has been made."

Dr Cullen denied suggestions from Green leader Jeanette Fitzsimons that he was trying to scapegoat the Maori Party.

After the select committee meeting, National's finance spokesman John Key said it was "pathetic" that Dr Cullen was looking at ruling out the slightest tax relief.

Dr Cullen told MPs that the package was one initiative set to be funded from the introduction of a carbon tax.

"We have to find answers to the fiscal hole left by the abolition of the carbon tax."

Other programmes that would have been funded by the carbon tax -- such as changes to business tax coming into force this year -- were going ahead and this meant finding alternative solutions to fund them. Dr Cullen said he suspected the Government would have stuck with the carbon tax if it could have mustered a majority in Parliament.

"But since we did not have parliamentary support for that proposal... there was little point in proceeding," he said.

Labour with the support of Jim Anderton, the Greens and the Maori Party could have passed the legislation, but Dr Cullen said the Maori Party had indicated opposition to the carbon tax and he was not willing to rely on its four MPs.

"Given the fact that we already had an experience before Christmas where we had definitive yes and then they voted no... we discerned it was unwise to hold ourselves hostage to that particular fortune over such an extended period of time.".

- NZPA